Saturday, April 5, 2014

Stock Market: Tech Is Not Dead

(Drivebycuriosity) - Tech stocks are in a free fall. Last week names like Facebook, Twitter, LinkedIn and Yelp have been absolutely pummeled and Netflix, Tesla, Biogen and other technology and biotech stock have found themselves caught up in a mass de-risking this spring, writes the blog "The Reformed Broker" (thereformedbroker). It seems that growth stocks (share of companies with over average growth rates) are out of favor.

The selloff is a typical herding behavior. Hedge funds and other speculators often behave as a herd that gets into panic and runs in a stampede when lightning strikes. Now they are dumping tech stocks - and anything which had gained over average in the recent 12 months -  just because these papers are falling and others are also selling - out of fear that these papers could drop much deeper.

I believe that the selling spree is myopic. Tech is not dead - quite the opposite. I think we are in the beginning of a new technological revolution. We are experiencing rapid advances in 3D-printing, robotics, nano-technology, bioengineering (new medicaments) and more industries which all are reducing costs, open new markets and make our lives better.

Consumers love smartphones, tablets, e-book readers, game consoles and other high tech devices. Those gadgets, which didn´t even exist in the year 2000, are rapidly getting better thanks to new apps and other software. Many digital devices can be used to access the Internet which accelerates the mobilization of the World Wide Net. The number of frequent Internet users is climbing sharply - especially in China and other emerging markets.

As a result people worldwide are spending much more time and money on the Internet for E-commerce and other services. Billions are using Internet and other incarnations of software to organize shopping, leisure time, traveling, dating, eating out and more.

Therefore online shops, search providers, social networks and a lot of other Internet based services are growing fast. Simultaneously there is a thriving demand for devices & software that enable the burgeoning data streams (chips, server, router, transmitters, satellites and more).

We are also in the beginning of the "Internet of Things": Consumers, for example, can now use smartphones to remotely check if they locked doors, left the lights on or turned down the thermostat. Retailers can help smartphone users find goods on store shelves, and wirelessly pitch sales promotions, reports the Wall Street Journal ( Parking meters can communicate with smartphone users. Companies sell wireless meters to manage energy usage, while General Electric exploits data generated by sensors to monitor the health of jet engines and gas turbines.

Technology in general is getting more and more important for our every day life. Chips & software are increasingly used for entertainment, communication, security, controlling room conditions, monitoring cars, steering household appliances and a lot of medical purposes.

Technology also is getting more important for businesses. Companies have to invest into Internet and other hard- and software technologies to adapt to a rapidly evolving world. They will use more technology to reduce costs (for instance via robotics and other forms of automatization) and to process a deluge of data to respond to competitors and to exploit chances on global markets.

Therefore I expect that the selloff in technology share will be short-lived and the technology sector will resume his rally soon.

Disclosure: I am an investor in, Apple & Baidu.

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